Jan. 15 (Bloomberg) -- New Zealand business confidence
surged to the highest in five quarters, a private survey showed,
sending the nation’s currency higher on signs of faster economic
growth this year.

A net 20 percent of 767 companies surveyed last quarter
said they expect the economy to improve in the next six months,
the most since the third quarter of 2011, the New Zealand
Institute of Economic Research Inc. said today in Wellington.
The net figure subtracts pessimists from optimists. More firms
expect their sales will improve in the three months to March.

Stronger profits and a pickup in the housing market
indicate domestic spending will accelerate in 2013 as signs of a
recovery in China help spur global demand for exports. New
Zealand’s dollar gained as investors increase bets that central
bank Governor Graeme Wheeler will start raising interest rates
this year.

“It’s a nice finish to 2012,” Shamubeel Eaqub, principal
economist at the institute, told reporters. “There is a much
sturdier base for the economic recovery.”

The so-called kiwi rose as high as 84.41 U.S. cents
compared with 84.05 cents before the report was released. It
bought 84.16 cents at 3:55 p.m. in Wellington, and is up 1.6
percent this year, the best performer among the Group of
10 currencies tracked by Bloomberg.

After adjusting for seasonal trends, confidence improved to
the best level since mid-2007, the institute said. An indicator
of domestic trading activity in the fourth quarter also rose to
the highest in more than five years.

Sentiment Turnaround

Based on those readings, annual economic growth probably
improved to 2.3 percent in the year through December from a 2
percent pace in the September, Eaqub said.

House prices rose 6.7 percent in 2012, the Real Estate
Institute of New Zealand Inc. said in an e-mailed report today.
There were 74,000 houses sold, the most since 2007.

Wheeler said in December he would monitor the housing
market and was prepared to raise rates if property price rises
fanned spending and borrowing.

“We continue to doubt the durability of the housing market
recovery without a supportive labor market backdrop,” Mark
Smith, senior economist at ANZ Bank New Zealand Ltd. in
Wellington, said in an e-mailed note. “With the New Zealand
dollar already in the stratosphere, the RBNZ is likely to shy
away from cash rate hikes.”

RBNZ Outlook

Eight of 16 economists surveyed last month by Bloomberg
News forecast a rate rise this year. Eaqub predicts Wheeler will
keep the official cash rate at a record-low 2.5 percent until
2014, saying the central bank should wait for clear evidence
that inflation has picked before tightening monetary policy.

A Jan. 18 report will probably show consumer prices rose
1.2 percent last year, according to the median forecast of 10
economists. The central bank on Dec. 6 forecast inflation will
accelerate to 1.6 percent by the end of this year and 1.8
percent by late 2014.

New Zealand’s jobless rate was a 13-year high of 7.3
percent in the third quarter. Hiring intentions remain weak, the
NZIER said in today’s report.

A net 20 percent of companies said it is harder to find
skilled workers, little changed from 21 percent in the previous
survey, today’s report showed. A net 9 percent plan to raise
prices over the next three months, it showed.

“We’re not seeing anything on inflation that makes us
particularly concerned,” Eaqub said. “There are no urgent
implications here for the Reserve Bank.”